Question

Tom said to tim,"you are playing smart."

Answer 1

Tom said to Tim that he was playing smart...
it is the answer if u want 2 convert it from direct to indirect...

Answer 2

Tom said to Tim, "you are playing smart."

This is a direct sentence. This sentence when converted to indirect sentence will be

Tom said to Tim that he was playing smart.  

Direct speech is a direct conversation between two people whereas indirect sentence is the representation of that conversion in an indirect manner